Automakers and Insurers Must Join in Reducing Connected Car Risk

Perceived benefits of connected vehicles is twofold: fewer automobile accidents and, in turn, smaller insurance payouts to cover damages.

That is the ultimate destination but insurance industry experts say the Promised Land remains some way over the horizon. After all, the advantages of connected features and infrastructure haven’t been realized as they haven’t yet been fully and widely deployed. Many sensors and driver assistance systems remain optional and may even not be operational when needed if drivers have switched them off.

This was borne out in a recent Highway Loss Data Institute study of insurance claims from BMW model years 2013-2017. It was overall positive for ADAS, finding that “collision avoidance systems are eliminating more crashes as the technology improves (and) the analysis showed that the combination of improvements in front crash prevent and the addition of adaptive cruise control resulted in large reductions in the frequency of property damage liability and bodily injury liability claims”.

Yet, despite the promising results, the study concluded “the impact of partially automated driving remains murky” as it highlighted that even the “highest level of automation available in production vehicles today, Level 2, still requires active supervision by the driver”. Some of them, such as lane assist, can be switched off by the driver.

Brian Halk, senior director, marketing, IMS, said the semi-autonomous technology can be problematic owing to driver error and because it varies from one automaker to another. “A failed sensor in a blind spot detector may result in a collision if a driver abandons all other practices of driving while switching lanes. The lack of standards across some of these technologies means one manufacturer’s lane-assist could be more accurate in harsh weather than another’s.”

This is seen by the insurance industry as a major roadblock on the way to safer driving and zero fatalities that to which many in the automotive industry and in various governments aspire. Steven Armstrong, vice-president of personal property-liability products, for Allstate, asserted: “The lack of standards for ADAS features is also a pain point for pricing risk. Forward collision avoidance, for example, can vary from car to car, which puts the onus on auto insurers to understand what it means in each vehicle. Further complicating the picture are drivers who change or turn off ADAS features, which makes it hard to price across the board for these evolving technologies.”

The HLDI data reinforced this lesson that the semi-autonomous nature of some features does not necessarily enhance safety and, in turn, lower claims. “A connected vehicle does not necessarily mean a safer vehicle. It just means the car can share data,” stated Teresa Scharn, Nationwide’s associate vice-president of personal lines product development.

Scharn and other insurance executives are finding the lack of ADAS standardization has another consequence – exponentially expanding the amount of data that must be analyzed. “Each OEM has various makes, models and years of vehicles. There are differing levels of ADAS on each of these and when multiplied by each OEM, this means even more complexity. Understanding and leveraging this complexity will be a differentiator for some insurance carriers.”

Bumpy road to Level 5 for insurers?

There are a number of challenges, along with the benefits, for insurance companies along the road to fully autonomous vehicles. They range from repairs to redundancies.

Halk said while the tech is making society safer, there’s still room to improve: “The ability for many of these technologies to fail as a vehicle undergoes regular wear and tear means drivers need not abandon all safe-driving practices but use technology as an accompaniment to even further increase their already safe driving practices.”

Allstate’s Armstrong advised insurers not to overlook replacement costs for damaged EVs: “The benefits of ADAS features come with increased costs as these technologies are expensive to repair after a collision. The biggest challenge (for insuring CVs) is the lack of consistent and granular data that can help us understand the risk and benefits of various ADAS features and technologies. Some of that happens because drivers disable the features so it’s difficult to assess safety on the whole when the technology is not always on.”

Chris Wiklund, group product manager for Arity’s mobility intelligence team, concurs that the ADAS make vehicle occupants safer and prevent accidents but adds: “Consumers are getting confused, that’s a challenge for the industry. Every brand has a different name… with marketing names for the system, there’s a misunderstanding of what the system can do and what it can’t. That creates a need for better education so they understand what the systems are capable of.”

Wiklund adds the lack of uniformity puts the onus on insurers to do due diligence on the wide array of ADAS offerings: “Insurers would love to apply one factor across the board but you need to know how each and every make and model works to correlate the loss to understand how much of a discount to give consumers.”

As some carmakers have put a toe in the water selling insurance, it still remains unclear who will provide insurance and when for ever-more connected vehicles. Some observers such as Halk see a potential collision course for automakers and insurers, if they opt to become competitors instead of teaming up to insure more autonomous vehicles. However, he doesn’t see this happening until years from now when Level 5 vehicles are driving themselves down the streets.

For her part, Nationwide’s Scharn asserted: “Insurers partnering with OEMs will offer better solutions for the market as vehicles continue to evolve. Vehicle technology changes will create new risks and they will be complex, including cyber risk and product liability.”

These are clearly areas that both parties are going to have to sort out as additional ADAS are introduced and become more widely adopted. Allstate’s Armstrong concluded: “Insurers will continue to find OEMs as an accurate and reliable source of connected car information and building relationships at the manufacturer level will prove critical for the industry. OEMs could also be a major part of future liability questions if Level 5 technology does not work as intended and causes unintentional damage to property or harms drivers or pedestrians. This means insurer-OEM relationships will be mutually beneficial.”